Supreme Court rules for generics in AbbVie 'pay for delay' case

June 17, 2013|By David G. Savage and Peter Frost | Tribune Newspapers

AbbVie owns patents to AndroGel, the male hormone developed by Solvay Pharmaceuticals.

WASHINGTON -- Stemming from a case involving a male hormone from AbbVie Inc, the Supreme Court ruled Monday that brand-name drug makers can be sued if they pay a potential competitor to put off selling a generic version.

The 5-3 decision based on anittrust laws is likely to benefit consumers with lower prices. The Federal Trade Commission, which has pursued suits against the drug makers, estimated these so-called "pay for delay" deals cost consumers and health plans $3.5 billion a year.

The ruling is likely to send a warning to drug makers who wish to deter generic rivals from entering the market. A "large and unjustified" payment to settle a patent dispute can trigger an antitrust claim against the brand-maker, the court said.

Drug patents can last for 20 years, but sometimes, the patents are questionable. For example, a drug company may obtain a new patent for 20 years by slightly changing the formula for a drug or how it is administered. In these instances, a generic competitor may sue, charging the extended patent is invalid.

Often, these suits end in a settlement in which the brand-name maker agrees to pay its rival to delay selling a generic for several years.

Such deals benefit the brand-maker with continued high profits, and they send money to the generic maker. Consumers, however, pay the cost through higher prices.

The case centered on the Chicago area’s largest drugmaker, North Chicago-based AbbVie Inc., related to a deal struck a decade ago involving the male hormone drug AndroGel.

AndroGel was developed by the pharmaceutical arm of Brussels-based Solvay Pharmaceuticals. Abbott Laboratories later bought the drug, which logged $1.2 billion in 2012 sales, and a host of other treatments from Solvay in 2010 for $6.2 billion. It spun off its $18 billion branded pharmaceutical business Jan. 1 into what's now known as AbbVie.

While Abbott retained the rights to market the drug overseas, AbbVie owns the drug's patents and marketing rights in the U.S.

The government claims Solvay cut a deal with generic drugmaker Watson Pharmaceuticals, now Actavis Inc., that allowed Watson to launch a generic version of AndroGel in 2015, five years before it was due to lose exclusivity on one of its patents. In exchange, Solvay agreed to pay Watson up to $30 million annually, the government said.

Government attorneys alleged the deal violated antitrust laws and kept cheaper generic competition out of the market.

In Monday's opinion by Justice Stephen G. Breyer, the high court announced a middle-ground position. It rejected the view of most lower courts that drug makers can never be sued for an antitrust violation so long as they are defending a valid patent whose 20-year life has not expired.

At the same time, the justices did not rule these "pay for delay" deals are always illegal under the antitrust laws, as the FTC had argued.

Breyer said a "large and unjustified reverse payment" from a brand-name maker to a generic maker can trigger an antitrust suit. But the outcome will depend on the facts. A judge will have to decide whether the payment was a reasonable way to end a lawsuit or an unjustified bid to ward off competition, he said in FTC vs. Actavis.